Cat Forum banner

1 - 18 of 18 Posts

·
Registered
Joined
·
722 Posts
Discussion Starter #1
Does anyone know if its better to pay off all your credit card debt at once in one lump sum or to make payments larger than the minimum to pay it off?

Patrick and I have $6,000 credit card debt and are finally able to pay it off but we are wondering if we should do it when we have the full amount in a month or in two payments of 3k each starting now.
 

·
Registered
Joined
·
202 Posts
My grandma worked at a bank my whole life. When I was trying to build credit my grandma told me to NEVER pay off a credit card completly right away unless you have other CCs with balances on them. For example if you have a Visa and you put 200 on it and then next month you want to pay off the 200 do that, and then put something else on it and pay it off, in your case I would make smaller payments,(if you only have a few CCs) so that way you build I good credit history and you are in good payment standings. :) But then again Im 24 so if somone older and wiser could give you good advise that would be good to listen to as well. :)
 

·
Registered
Joined
·
1,589 Posts
When we were trying to buy our house the mortgage agent basically told us that no one knows what REALLY effects the credit score. MY BF had a low limit credit card that was almost paid off. He paid it off and it dropped his credit score. It is like the want you to owe money.
 

·
Registered
Joined
·
1,370 Posts
Pay it off! Money may be tight for a few weeks, but you won't have that extra bill the next month ...

By the way, did anyone catch that Frontline special on the credit card industry? It was frightening -- they are completely unregulated, can change your interest rate at anytime, and there is no cap on how much interest they can charge. The scariest thing is if you fail to pay on any other loan (doesn't have to be a credit card), such as house or car payment, they can change your interest rate because they consider you an at-risk customer.
 

·
Registered
Joined
·
722 Posts
Discussion Starter #8
Well we have had the 6k balance on it for over a year, and the interest is a lot, we could pay it down to just like $100 I guess.
 

·
Registered
Joined
·
10,243 Posts
When I talked with a credit specialist awhile back, they recommended I pay off my high balance on my credit cards right away since I have been in such debt for so long. Once you pay it off, you can start doing the leave a little bit balance left over and don't pay it all at once thing. But I have a lot of debt on my 2 Mastercards right now :evil:
 

·
Registered
Joined
·
1,398 Posts
Back in a former life as a credit approver, I liked to see payment history. If you're building credit, pay it down to a couple hundred dollars and keep it there, paying more than the minimum payment every month, but maintain a balance and payment history for as long as possible. If your credit is otherwise good (and varied), and you're stable in employment and residence, you can pay it off if you want. If your debt-to-income ratio is high (your monthly payments as a percentage of your income), it will benefit you to pay it down or completely off.

Back in the old days, the credit bureaus just showed a limit, current balance/payment due, highest balance used, and payment history showing only whether or not payments were on time or late. I haven't seen a bureau in about 12 years though, so I'm not sure what they contain these days.
 

·
Registered
Joined
·
1,370 Posts
the credit bureaus just showed a limit, current balance/payment due, highest balance used, and payment history showing only whether or not payments were on time or late.
I got my credit report last year (someone stole my social security number :evil:), and it was virtually the same thing.
 

·
Registered
Joined
·
13 Posts
Pay it of in 6 months.
Make $1,000 each month.
Making payments like that should look good on you.
Then stay off major debts for a few months.
 

·
Banned
Joined
·
12,197 Posts
If you have the cash available, it's best to pay the whole thing off because you're still paying non-deductible interest. Except if you have to dip into your reserve funds, you shouldn't dip into that for something like paying off debt, because it's just there for emergencies.
 

·
Registered
Joined
·
617 Posts
and in house ones are bad. i will be so happy when my best buy one is paid off. i think i have $500 to go, but the intrest rate is 23%.
 

·
Registered
Joined
·
505 Posts
i have about $1700 in debt, but $1500 of that includes the financing for my gateway laptop, so i don't really like to count that. the other $200 are from my credit card, which i only used last month when my husband was laid off from work and things were REALLY tight. but things are better now, so i will be paying that off shortly.
 

·
Registered
Joined
·
722 Posts
Discussion Starter #16
Ok we are going to go the pay it down to just $100 on each card(we have two, one totalling 1100 owed and the other 4800 owed). My question now is should we cancel one or both and get a different one with lower rates? Or keep the ones we have or just cancel one and keep the other? We had both maxxed until about 4 months ago when we slowly started paying them down (paying over the min payment)
 

·
Registered
Joined
·
1,398 Posts
So much of this depends on your personal situation and goals right now.

I advise anyone who's going to be shopping for a home in the next couple of years to avoid all unnecessary credit bureau inquiries (applying for new cards), as excessive inquiries look really bad to lenders.

Depending on your debt-to-income ratio (DTI) and other factors, it may benefit you to close out one of the accounts when its paid off (especially if you'll be looking for a mortgage in the near future). OTOH, sometimes it's worth your while to keep a second card open with a zero balance (provided that the interest rate isn't criminal)...if you're self-employed, have a chronic illness, or otherwise feel that you could find yourself in a sudden emergency (such as with your cattery), it may be worth your while to put the card with the larger limit in a drawer and keep it available, and use the smaller-limit card for regular use (you can always close one or the other if needed). I keep two open cards...one is for everyday purchases (since I have a complicated tax structure, I need the documentation on deductible stuff), and the other is for emergencies (I use it occasionally just to keep the account active and functional).

However, I don't recommend this if you're someone who "just can't stop themselves" from buying stuff. The key is to keep the emergency card for emergencies and keep the balance down on the everyday card...and even the old trick of freezing the emergency card in a block of ice doesn't work nowadays when you can buy everything online without actually having the card. :?

Not knowing your personal/debt situation, interest rates, and future goals, it's impossible to say what the best option is. For me (I already have a house that will hopefully be paid off within 12 years), it's worth it to have a good chunk of emergency funds available, because we're self-employed and a serious medical situation would hit us with five-figure insurance deductibles. If you're both stably employed and insured, with a good solid credit history, it may make more sense to cut down your debt and potential credit (open accounts).
 

·
Registered
Joined
·
1,370 Posts
My question now is should we cancel one or both and get a different one with lower rates? Or keep the ones we have or just cancel one and keep the other?
You can call your credit card company and say, look, I've been a good customer for the past XX years, and I want to see if you will lower my interest rate. They lowered mine from 18% to 14% or 13% a few years back, so you can do that.
 
1 - 18 of 18 Posts
Top